Delhi District Court
M/S Shiv Nath Rai Har Narain vs Assistant Commissioner Of Income Tax ... on 13 January, 2014
IN THE COURT OF SH. NARINDER KUMAR
ADDITIONAL SESSIONS JUDGE(CENTRAL): DELHI
Criminal Revision No.136/2013
In the matter of:
1. M/s Shiv Nath Rai Har Narain.
2. Sh. Jai Narain,
3. Sh. Har Narain,
(Appellants No.2 and 3 are Partners of Appellant no. 1 i.e.
M/s Shiv Nath Rai Har Narain , 4098, Naya Bazar,
Delhi110006.) ....Appellant
Versus
Assistant Commissioner of Income Tax (Investigation)
Circle 4 (1), C. R. Building,
I. P. Estate, Delhi. ....Respondent
Date of Institution: 30.10.2013
Date of Judgment: 13.01.2014
J U D G M E N T
In the present appeal, appellant no. 1 is the partnership firm (which is nonexistent) whereas appellant no. 2 and 3 were its partners. Respondent herein instituted criminal complaint no. 1278 wherein the appellants herein and another namely Mauji Ram were summoned to face trial for offences under Section 276 (c) and 277 of Income Tax Act (hereinafter referred to as "the Act"). Mauji Ram was reported to have left this world and accordingly proceedings against him were dropped.
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2. It may be mentioned here that before the Trial Court Sh. Har Narain, appellant represented the partnership firm as well.
The substance of accusation as available in the charge framed on 17.09.2001 by learned ACMM reads as under: "That you being the firm, and its partners, attempted to evade income tax chargeable under the Income Tax Act when return of income for the A/Y 198384 were filed on 19.10.1983 declaring an income of Rs.1, 24, 420/ duly verified signed by accused Jai Narain, whereas, assessment of firm was completed on 27.03.1986 under Section 144 of the Income Tax Act on a total income of Rs.9,26,520/ as in the survey u/s 133 (A) of the Income Tax Act carried on business premises belonging to accused firm in the night intervening 21/22 March 86, a large number of books of account including account books for the A/Y 198384 were recovered which were claimed by you as having made destroyed in the fire, hence committed an offence punishable under Section 276C of Income Tax Act at Delhi from where firm was functioning.
Secondly, during the above said period, at the time of filing of return of income of the accused firm, for the A/Y 198384, false verification was done and false statement made in the form of documents submitted in support of return of income Ex PW1/I firm with a evade tax etc. chargeable under the Income Tax Act, thereby committed an offence punishable under Section 277 of Income Tax Act."
3. In order to prove its case, complainant examined PW1 Sh. A. P. Srivastava the then IAC, Range9, Delhi and Incharge of Income Tax Assessment of appellant herein for the assessment year 198384 and CW2 Sh. Y. K. Batra, the then ACIT, investigation Circle 4 (1), during the period from 1988 to 1989.
4. Vide impugned judgment dated 09.10.12, learned Trial Magistrate held accused no. 1 firm and its two partnersappellants no. 2 & 3 herein guilty of offences under Section 276 (c)(1) and 277 IPC and vide order on sentence dated 03.10.2013 sentenced them as 2 under: Name of Offence Rigorous Fine Simple accused Imprisonment Imprisonment in convict default of payment of fine.
Har Narain, 276(C)(1), 277 and 3 months Rs.10,000/ Two Months Convict no. 3 278B of the Act Jai Narain, 276(C)(1), 277 and One year Rs.10,000/ Two Months Convict no. 4 278B of the Act M/s Shiv 276(C)(1), 277 and Rs.20,000/ Nath Rai Har 278B of the Act Narain. Convict no. 1
5. As per allegations levelled by the complainantrespondent in the criminal complaint, M/s Shiv Nath Rai Hari Narain was a dealer and commission agent in food grains. On 19.10.1983, the firm filed income tax for the assessment year 198384 declaring an income of Rs. 1,24,420/. The return was signed and verified by Sh. Jai Narain, partner. Assessment was completed on 27.03.1986 on a total income of Rs.9,26,520/.
Accused are alleged to have failed to furnish proof of payments of dalali amount of Rs.1,24,360/. Notice under Section 145 (1) of the Act was issued. Accused failed to produce books of accounts in support of the plea that the books of account of the firm and sister concern were completely destroyed in fire, which broke out on the night intervening 11/12.11.1985.
Taking into consideration all the factors, assessing authority made following two conditions: 3
1. Rs.7,00,000/ on account of estimated cash sale.
2. Rs.80,000/ on account of unverifiable dalali payments.
6. As further alleged by the complainant, accused willfully failed to produce books of account and furnish other information and that accused willfully attempted to evade tax payments on cash and on account of dalali payments.
Learned ACMM did not find any merit in the contention raised on behalf of the accused persons that the present complaint was liable to be dismissed as other two complaints filed by the complainant were dismissed in respect of other two assessment years.
Learned ACMM also did not find any merit in the contention raised on behalf of the accused that merely from seizure of the same documents pertaining to the assessment year 198384, it could not be said that accused withheld any information for unlawful evasion of tax or filed false return.
Learned ACMM further observed that the recovery of documents from the premises showed that the accused had malafide intention and that in the garb of so called incident of fire, they did not produce relevant documents. Accordingly, accused persons have been held guilty, convicted and sentenced.
7. Learned counsel for the appellants has argued that judgment of conviction and order on sentence passed by Trial Court for the offence under Section 276D of the Act deserves to be set aside as no charge for this offence was framed against the accused persons. 4
8. Vide impugned judgment dated 09.10.2012, learned ACMM held the accused guilty of the offence under Section 276(C)(1) and 277 of the Act. None of the appellants has been held guilty of the offence under Section 276D of the Act. Even no charge for this offence was framed against any of the accused appellants. Therefore, no question for setting aside conviction and sentence for the offence under Section 276D of the Act arises.
9. Learned counsel for appellants has submitted that appeal is maintainable even on behalf of the appellant no. 1 firm as under
Section 189 of the Act proceedings under this Act do not abate merely on dissolution of partnership firm.
10. Although in the Section 189 of the Act, it has not been specified that these proceedings also apply to the proceedings before the forum other than the Assessing Officer or Commissioner (Appeals), learned counsel for the appellant has righty submitted that words "other sum payable" and "all the provisions under this Act" would cover the even criminal.
Herein, appellants firm is alleged to have been dissolved on 02.01.1991 while sending for prosecution has already been granted on 28.02.1989 and complaint was filed in Court on 17.03.1989.
In Commissioner of Income Tax v. Sant Lal Arvind Kumar reported as 1982 (186) ITR 379, it has been held that all the provisions of partnership Act apply to Income Tax Act of 1986 unless there is a provision under Income Tax Act which compels a contrary view. 5
11. Record reveals that appellant no. 1 firm was being represented before the Trial Court by Jai Narain, appellant. In view of the above provisions of law and decision in the above referred to case, appeal can safely be said to be maintainable even on behalf of appellant no. 1 firm though it got dissolved on 02.01.1991.
12. One of the contentions raised by learned counsel for the appellants is that sanction granted on 28.02.1989 for prosecution of the accusedappellants herein was illegal in face of bar under Section 279 (1A) of the Act.
13. It has been submitted by learned counsel for appellants that herein penalty imposed upon the appellants under Section 271 (1) (b), 271 (1) (c), 273 of the Act was dropped vide order passed on 24.02.1988, and subsequently vide order dated 29.11.1988 penalty imposed upon the appellants for the offence under Section 271 (1) (i)
(a) of the Act was set aside. Therefore, the contention is that the appellant could not be proceeded against either for offence under Section 276 (C) or for offence under Section 277 of the Act.
14. On the other hand, learned counsel for the respondent has submitted that genuineness of the order dated 24.02.1988 placed on record for the first time by the appellants is in question and that as per his instructions Department is conducting inquiry as to its genuineness.
15. As regards order dated 29.11.1988, learned counsel for the respondent has submitted that the penalty was not waived by an order 6 under Section 273 (A) (i) of the Act but by way of an order passed in appeal filed under Section 246 of the Act and as such provisions of Section 279 (1) (a) do not come to the aid of the appellants so as to say that sanction granted for their prosecution was illegal.
16. In reply, learned counsel for the appellants has submitted that expression "either ways" appearing in Section 273A includes waving of penalty by the Commissioner by way of an appeal and there no merit in the contention raised by learned counsel for the respondent that provisions of Section 279 (1A) do not apply to waiver by order under Section 246 of the Act, is without merit.
17. Another argument advanced by learned counsel for the appellants is that conviction for the offence under Section 276C and 277 is bad in law as the prosecution failed to established before the Trial Court that the appellants willfully attempted to evade payment of taxes. Reference has been made to the impugned judgment to point out that learned ACMM has nowhere given any finding with respect of offence under Section 276C and 277, that is to say that prosecution had established willful attempt on the part of the appellants to evade taxes and giving false statement in verification. Therefore, the contention is that the appeal deserves to be allowed as regards both the offences as well.
18. On the other hand, learned counsel for respondent has contended that in the impugned judgment learned ACMM clearly observed that appellants had willfully failed to produce accounts and 7 documents and that recovery of the documents from the premises of the appellant showed malafide intention of the accusedappellants and it appeared that in the garb of so called incident of fire they intentionally did not produce the relevant documents.
Learned counsel for the respondent has further referred to concluding paragraphs where learned ACMM, held that the accused had concealed their actual income and eventually evaded taxes.
During the relevant period, Section 279 (1A) of the Act read as under: "A person shall not be proceeded against for an offence under Section 276C or 277 in relation to the assessment for an assessment year in respect of which the penalty was imposed or imposable on him under clause (iii)of subSection (1) of Section 271 has been reduced or waived by an order under Section 273A."
Section 273A provides that Commissioner may exercise his discretion, whether on his own motion or otherwise while deciding appeal. This section empowers for exercise of power of waiving of penalty or imposed or imposable in clause (iii) of subsection (i) of 273A where he satisfied that a person
(b) in the case referred to in clause (ii) has, prior to the detection by the [Assessing] Officer, of the concealment of particulars of income or of the inaccuracy of particulars furnished in respect of such income, voluntarily and in good faith, made full and true disclosure of such particulars.
During the relevant period, Section 271 (1) (c) (iii) of the Act read as under: (1) If the Income Tax Officer or the Appellate Assistant 8 Commissioner [or the Commissioners (Appeals)] in the course of any proceedings under this Act, is satisfied that any person
(a) xxxxx
(b) xxxxx
(c) has concealed the particulars of his income or furnished inaccurate particulars of such income, Explanation
(iii) in the case referred to in clause (c) in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income.
Provided that, if in a case falling under clause (c), the amount of income ( as determined by the Incometax Officer on assessment) in respect of which the particulars have been concealed or inaccurate particulars have been furnished exceeds a sum of twentyfive thousand rupees, the Incometax Officer shall not issue any direction for payment by way of penalty without the previous approval of the Inspecting Assistant Commissioner. "
19. A perusal of record would reveal that the Assessing Officer, Inspecting Assistant Commissioner of Income Tax assessed the income of the firm on 27.02.1986 at Rs.9,26,514/. At the same time, it was observed that the Inspecting Assistant Commissioner of Income Tax initiated penalty proceedings under Section 271 (1) (a), (b), (c) and 273 separately.
20. Record further reveals that on 24.02.1988, penalty proceedings under Section 271 (1) (c), 271 (1) (b) and 273 were dropped but penalty of Rs.12,288/ was levied under Section 271 (1) (a).
Undisputedly, the penalty levied under Section 271 (1) (a) was challenged by the appellant by way of appeal no. 287/8889 and Commissioner of Income Tax (Appeals) XIV, New Delhi allowed the appeal while observing that the penalty of Rs.12,288/ was not 9 justified.
21. In the paper book appellants have placed on record at page no. 75 a hand written document which according to learned counsel for the appellants is copy of order dropping penalty proceedings under Section 271 (1) (a), 271 (1) (c) and 273 of the Act.
22. As noticed above, learned counsel for the respondent submitted that this document was never placed before the Trial Court and that genuineness of this documents produced here for the first time is in question.
Even if in the course of arguments, learned counsel for the respondent has disputed the genuineness of the order dated 24.02.1988 dropping penalty proceeding under Section 271 (1)
(c), 271 (1) (b) and 273, had there been any other penalty proceedings against the appellants, they would have challenged the same as well and not filed the appeal challenging the penalty under Section 271 (1)
(a) of the Act. Furthermore, copy of order dated 24.02.1988 is a copy certified by Sh. R. K. Bajaj, Income Tax Officer, Ward29(1), Drum Shape Building, New Delhi.
23. The fact remains that penalty proceedings 271 (1) (c), 271 (1) (b) and 273 were dropped by the department whereas penalty imposed under Section 271(1) (a) was set aside by Commissioner of Income Tax (Appeals) XIV, New Delhi.
24. It is made clear that if the certified copy of order dated 24.02.1988 purported to have been issued by officer of 10 department of respondent is ultimately found to be a forged document, respondent shall be at liberty to set the law into motion on the point of forgery of the document and its use in or in relation to Court proceedings.
25. Herein, sanction for prosecution of the accused persons was granted on 28.02.1989 whereas penalty proceedings were separately got initiated in February 1986; vide order dated 24.02.1988, penalty proceedings for offences under Section 271 (1) (b) & (c) and 273 were dropped, and vide order dated 29.11.1988, penalty for the offence under Section 271 (1) (a) also came to be dropped even before the sanction had been accorded.
All this goes to show that at the time sanction was accorded, neither there were any penalty proceedings nor any penalty in existence against the accusedappellants for any of the offences including 271 (1) (c) of the Act.
26. On the revenue site, record would reveal that appeal no. 255/8687 came to be disposed of by Commissioner of Income Tax (Appeals) VI, New Delhi, observing in the manner as : For the Assessment Year 198384 as already stated above no books of accounts are available. It does not really matter as to whether the books of accounts could not be genuinely produced by the appellant or were not produced before the assessing officer because it was not convenient to do so. The fact remains that the assessment has been made without the books of accounts."
Copy of order dated 25.04.21990 passed by ITAT in the second appeal contains following observations of the Tribunal: "The observations made by the Assessing Officer that the 11 assessee was giving false information about the loss of books in fire is nothing more than a creation of his mind so this is found from the fact that out of the seized records only two books were found related to the assessment year under appeal."
27. At this stage, relevant observations made by Hon'ble Supreme Court in case of Prem Dass vs. Income Tax Officer (1999) 5 Supreme Court Cases 241, on the point of waiving of or dropping of penalty proceedings other than by way of appeal need to be referred to.
In Prem Dass's case (supra) accused were convicted under Section 276C and 277 of the Act for filing an incorrect return of income tax of AY 198081, making an incorrect verification thereon and deliberately withholding books of account later seized during search under Section 132. The first appellate Court found the charge to be vague, and the evidence insufficient to infer criminal intent on the part of the appellant and also that there was nothing on record to pinpoint the identity, veracity or falsity of entries in the books of account of which the entire prosecution case was founded.
Hon'ble Supreme Court observed in the manner as under: "10. We also find sufficient force in the contention of Mr. Salve that the legislative mandate in Section 279(1A) of the Income Tax Act has not been borne in mind by the High Court while interfering with an order of acquittal. Mr. Shukla, no doubt, has indicated that the said provision will have no application as the penalty imposed has not been reduced or waived by an order under Section 273A. We do not agree with the aforesaid literal interpretation of the provisions of Section 279 (1A) of the Act when we find that the Commissioner of Income Tax (Appeals) has reduced the penalty. Further, that the Tribunal has totally set aside the order imposing penalty could not have been lost sight of by the High Court while considering that question whether the order of acquittal passed by the Sessions judge has to be interfered with or not, particularly, when the gravamen of indictment relates to 12 filing of incorrect return and making wrong verification of the statement filed in support of the return, resulting in initiation of penalty proceedings. Bearing in mind the legislative intent engrafted under Section 279 (1A) of the Income Tax Act and the conclusion of the learned Sessions Judge on appreciation of evidence not having been reversed by the High Court and the grounds on acquittal passed by the Sessions Judge not having been examined by the High Court, we have no hesitation to come to the conclusion that the High Court as not justified in interfering with an order of acquittal."
28. Accordingly Hon'ble Apex Court set aside the impugned order of the High Court and acquitted the appellant of the charge under Section 276 (c) and 277 of the Act, levelled against him.
29. In view of the above discussion and in view of provisions of Section 279 (1A) of the Act and decision in Prem Dass's case (supra), this Court finds merit in the contention raised by learned counsel for appellants that the appellants should not have been prosecuted for the offences under Section 276 (c) and 277 of the Act, So, appeal deserves to be allowed.
30. As a result of the above findings, appeal is hereby allowed and the judgment of conviction and sentence of all the three appellants recorded by the Trial Court is set aside and all the three appellants are acquitted in this case.
31. Trial Court record be returned. Appeal file be consigned to Record Room.
Announced in Open Court
on 13.01.2014 (Narinder Kumar )
Additional Sessions Judge(Central)
Delhi.
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